Kondratieff Wave and the esoteric Stock Market
by Peter Baxter
Posted originally July 8th, 2010
[The title to this article is mine: it was originally published as “July 2010” and was posted as commentary on Kondratieff Winter, the best, possibly the only site dealing with the esoteric structure behind the human edifice we call the Stock Market. This site is highly recommended to anyone interested in the cosmic cycles that underpin all human activity, including of course, the economic and the financial.]
THE TUG-OF-WAR IN RECENT WEEKS BETWEEN BULLS AND BEARS APPEARS OVER as the bears took control last week of market sentiment in convincing fashion. The fallout from the last seven consecutive losing sessions is only eclipsed by the psychological, technical, and concrete damage done to erode investor confidence in US and most global stocks. In June 2010 some of the hallmark features of delusion were exposed to a primary degree, namely the debt -based Keynesian approach now being exposed as futile and impotent. Hardly a panacea, it instead redirects capital so won’t chase its highest utility because there’s no accountability in the public sector. Ask any CEO in the private sector if he could get away with the enduring malfeasance that defines federal Keynesian spending. Sadly, federal spending in recent decades has been severely misguided and thus skewed the input from the public sector to the overall economy to levels that would upset our founding fathers. This Keynesian mess is far from what they sought in the intelligent design of our Declaration of Independence and our Constitution.
So brace yourselves for the third wave down of the fourth Kondratieff Winter. The signs of deflation can be seen anywhere you look- CPI,PPI, M3 in severe decline, housing, etc. For a glimpse on how this may play out, please refer to the most recent material added in the Kondratieff Winter-Mayan section that traces the fractal chart timeline of the long wave super-cycle. It reveals amazing symmetry with the 1930-32 reality and traces out a severe plunge in global stocks in the coming months: http://kondratieffwinter.com/blog/kwave-mayan-calendar/risks-of-believing/
The excesses of this credit super-cycle haven’t been sufficiently removed and the cleansing period is now upon us. The fiscal and monetary stimulus provided since 2007 served the same purpose as methadone given to heroin addicts – it’s a short term fix that hardly fixes anything. The US economy and our capital markets are now experiencing the early stages of their own “shakes”, and likewise process is painful and not very pretty. The current pattern correlates the 1930-32 period of carnage despite the radical change that has occurred since the last economic winter in the 1930’s. Such is the majesty of our K-Wave theme- it endures throughout time because it is marked by the seasons of time.
The developments in June 2010 marked a true turning point in the perception of any lasting recovery. Any delusions of a V-shaped recovery were put to rest in May from the retail sales and unemployment figures and in June the abysmal numbers from new home sales, autos, and plummeting consumer confidence cast doubt on any lasting recovery. Earnings season begins next week, and expectations are high that Q2 corporate profits will look great when compared on a year over year basis. However the collective mindset on Wall Street is more concerned with the prospects of corporate guidance on Q3 and beyond which may let down those “animal spirits” still enamored with economic growth solely dependent on artificial federal spending to get through the night.
In recent weeks certain other cancers began to spread that would undermine any real economic recovery- chief among these is the state of our local and state governments. Most of these municipalities have become so severely crippled to the point where they have finally transitioned from denial to action in addressing their plight. While this is without doubt good in the long run and sorely overdue, it only adds to the problem in the short term because this implies significant job cuts and reductions in state and local spending at a time when our economy needs this spending the most.
Such austerity measures are classic proof positive that at all levels of government- federal, state, and local- plan their economic growth ass backwards. They should reign in spending as a permanent theme and resort to fiscal stimulus only during the troughs of the economic super-cycle. Instead they choose to keep the pedal down constantly through high growth policies and choose to reign in spending in periods such as the present, when stimulus is truly needed and could help if applied with diligence and purpose. Yet it appears now only the havoc of an economic winter will force our leaders to reconsider the absurdity of the present Kenyesian model.
The hints of such havoc festering in June made investors flee en masse to the perceived safe haven of Treasuries, taking the yield on the ten year bond under 3%- yes, 3%! What is that telling us? Simple, deflation has already arrived. The smart money knows that bonds are the place to be in the short and intermediate term. Yet all bonds aren’t created equal. During these early stages of deflation, US Treasury bonds, bills and notes and high quality corporate bonds will far outperform junk bonds, municipals, and REITS. In fact, I expect the spreads between these classes to widen in the coming months to eye-popping levels as investors discern between the grades of quality and realize that they are actually more attractive in the short term for capital appreciation.
However in the final analysis, only high quality corporate bonds issued by companies with cash flows sufficient to weather this downturn will suffice. US Treasuries are too fraught with credit risk and are likely to implode with muni’s when the music stops. And although the bond vigilantes are now in seclusion, you can count on their return when a whipsaw effect is possible as it is now.
Now let’s return to the debate between inflation and deflation now at the forefront. Since this vexing dilemma is so crucial to the ultimate direction of the capital markets, why is there no clear winner this far into the winter season? Why is deflation so hard to accept? Are we all really that hard wired in our DNA to believe that an upwardly sloping curve for stocks, the economy, and all assets is a birthright? It appears so, despite all evidence to the contrary. The housing market tumble in recent years should have taught us that, but apparently not. Why do certain lessons of history- that economic depressions and stock market crashes occur often and in regular intervals- remain elusive for so long to us?
The source of our collective ignorance may be seen best by through this “birthright” mentality. It is then more fully facilitated through the nature of these unique events that happens every other generation, so that very few who are presently in a position to impact the masses would ever have a clue about the scale and scope of the conditions of such a period. This trait is very purposeful because it’s born through the immutable laws inherent within the intelligent design of our universe. According, any outlier force such as deflation seems to only occur just when we least expect it and thus stubbornly deny that it may even exist at all. Oh what a tangled web we weave when we choose to ignore our past so full of latent clues. Don’t fall victim to the calm that always precedes the storm. Sell stocks and assets now. Get liquid so you can exploit the stock plunge on the downside or hedge your wealth in some way.
Discount this generational feature of the K-Wave at your peril. For every blowhard mainstream analyst pounding the table that corporate profits are all that matter there are legions over the millennia that would remind us just how easily we are fooled by our own dogma. Such a dogma may suggest we have a nature more insidious than we would choose to believe, including having the audacity to believe for even an instant that the fiat currency ponzi scheme now underlying the entire global financial system is safe and enduring. Sorry folks, it isn’t.
Such systems aren’t safe at all during the later stages of economic winters, when the cleansing phase is in full swing as it is now. This cleansing phase will take a giant leap forward by the end of July when certain astrological conjunctions align that unite conflict and scale as never before. Pluto has entered Capricorn to shake down all that’s wrong in this world and all the while Jupiter and Saturn will emerge to provide the scale needed for enduring change. These line-ups last appeared during the early 1930’s when the Dow Jones plunged over 90% in just under two years. These emerging conjunctions indicate that a more far-reaching and provocative catalyst is just ahead. Some may snicker at any mention of the impact of heavenly forces on the market, but history shows they are quite relevant.
Given this and the projected path implied by the sacred geometry of the Elliott Wave, the developments in the capital markets and social mood could be quite remarkable in the coming weeks. Surely, when I post comments in early August the world will seem a bit different to us all. We are now inching toward a new worldview that will soon re-think the value of material gains and re-value a spirit of cooperation among those engaged in business and commerce.